Malta opposes EU tax plans

Malta will be resisting any attempts by the EU to impose a cross-border common tax base for companies, as it believes this is not in its interest.

A senior government official yesterday told The Times that Malta does not share the European Commission's apparent wish to have new corporate tax rules in the coming years and together with the majority of EU member states will oppose such plans.

EU Taxation Commissioner Laszlo Kovaks yesterday told a meeting of the EU's Finance Ministers in Brussels that the Commission is making headway on devising common tax rules for companies operating across EU borders. He said the aim of these rules is to cut the complexity and cost to businesses of complying with different tax systems. Mr Kovacs said his aim is to present a legislative proposal in early 2008 so that new rules can come into force by 2011.

The new plan will only take off if it obtains the consensus of all EU member states, something which currently seems impossible.

According to Mr Kovacs, there are 18 member states that seem to be ready to discuss the possibility of having common taxation rules for companies.

Other member states, however, maintain that there is much less consensus. The government official said: "From the meetings we attend it is evident there are many member states that do not share the Commission's opinion over this issue. To us it is clear that many member states oppose the Commission's plans."

Malta, together with the UK, Ireland, Estonia and Slovakia, openly opposes these plans. On the other hand, one of the staunchest supporters for a common tax base is Germany, which next year will be taking over the presidency on the EU and is expected to push this issue further.

Knowing that unanimity over this plan is next to impossible, Mr Kovacs has also suggested the possibility of an enhanced cooperation mechanism whereby opposing countries could stay out of the system while the rest would share the common system for tax cooperation. He said the plan will leave out small companies that are not interested in doing business outside their country and they will be permitted to keep using their national taxation system.

Malta at present has no corporate tax system and companies are taxed at a maximum rate of 35 per cent on their profits. The Maltese tax system is seen as an important tool for attracting foreign investment to the island, particularly in the financial services sector.